Q1'17 Earnings Season: Best Since 2011
The Q1'17 earnings season continues to be a story of growth so far. According to Zack’s Investment Research, 181 members of the S&P 500 have reported as of Wednesday, April 26th. Total earnings from these companies have grown 10.0% in Q1'17 compared to 7.0% in Q4'16. Revenues are also up 4.3% in compared to 2.4% in the previous quarter. Additionally, 75.7% of these companies have also beat their EPS estimates while 64.1% have beaten their revenue estimates. This compares favorably to the rolling 12-quarter average beat percentage for EPS and revenues of 71.8% and 55.8%, respectively.
Overall, S&P 500 member earnings are on pace to reach their highest level since 2011.
Materials Sector Continues To Outperform
While only 36% of the S&P 500 member companies have reported, one sector that has outperformed has been materials. So far these companies have reported total earnings growth of 47.7% while 75% have beat their estimates. These materials stocks have seen a positive 2.3% price impact immediately following earnings which compares favorably to the 0.3% impact for the entire 181 company group that has reported thus far.
We reported previously how the materials sector outperformed when earnings season first kicked off last week and highlighted 5 stocks ready to follow suit. A week later, four of the five material companies we named are up 7.8% (on average) following their earnings release.
Allegheny Technologies (NYSE:ATI) increased 8.9%, Owens-Illinois (NYSE:OI) moved up 6.3%, Carpenter Technology (NYSE:CRS) moved 11.3% higher and Huntsman (NYSE:HUN) increased 4.5% while Coeur Mining (NYSE:CDE) lost 3.6%.
In case you missed out, here are another five stocks in the materials sector that are fundamentally undervalued and ready to jump on earnings.
5 Material Stocks That Could Jump On Earnings
Using this stock screen, we found five stocks classified in the materials sector that are expected to report earnings this week (5/1 - 5/5) and are trading below their finbox.io fair value estimate: Flotek Industries (NYSE:FTK), Rayonier Advanced Materials (NYSE:RYAM), U.S. Concrete (NasdaqCM:USCR), Haynes (NasdaqGS:HAYN) and Koppers (NYSE:KOP).
Flotek develops and supplies chemistry and services to the oil and gas industries worldwide. The company is expected to report earnings on Wednesday after the market closes and appears highly undervalued when applying Wall Street estimates to seven separate cash flow analyses.
<img width=100% src='http://res.cloudinary.com/finbox/image/upload/v1493385327/1_-_FTK_Fair_Value_qsefbg.jpg' alt= ‘FTK finbox.io fair value estimate’>
View all 7 valuation models that derive FTK's fair value estimate.
Originally a spin-off from Rayonier (NYSE:RYN) in 2014, Rayonier Advanced Materials manufactures and sells cellulose specialty products worldwide. The company is expected to report earnings on Monday after the market closes. Finbox.io's $17.50 intrinsic value estimate is slightly above Wall Street's $16.25 target and both imply over 20% upside.
<img width=100% src='http://res.cloudinary.com/finbox/image/upload/v1493385327/2_-_RYAM_Fair_Value_unlry6.jpg' alt= ‘RYAM finbox.io fair value estimate’>
View all 7 valuation models that derive RYAM's fair value estimate.
U.S. Concrete produces ready-mixed concrete and concrete-related products for the construction industry in the United States and is expected to report earnings on Thursday before the market opens. Six separate valuation models imply 30% upside which is slightly above the $80.71 average price target derived from seven Wall Street analysts.
<img width=100% src='http://res.cloudinary.com/finbox/image/upload/v1493385327/3_-_USCR_Fair_Value_zc8oet.jpg' alt= ‘USCR finbox.io fair value estimate’>
View all 6 valuation models that derive USCR's fair value estimate.
Haynes develops, manufactures and distributes nickel and cobalt-based alloys in sheet, coil, and plate forms worldwide. Earnings are expected to be reported on Thursday. While shares currently trade right at their 200 day moving average, the stock appears roughly 25% undervalued purely on a fundamental basis.
<img width=100% src='http://res.cloudinary.com/finbox/image/upload/v1493385327/4_-_HAYN_Fair_Value_ok7wkg.jpg' alt= ‘HAYN finbox.io fair value estimate’>
View all 7 valuation models that derive HAYN's fair value estimate.
Koppers sells treated wood products, wood treatment chemicals, and carbon compounds in the U.S. and internationally. Although the stock is trading near its 52-week high, shares still look to have some upside potential going into earnings.
<img width=100% src='http://res.cloudinary.com/finbox/image/upload/v1493385327/5_-_KOP_Fair_Value_dkdh76.jpg' alt= ‘KOP finbox.io fair value estimate’>
View all 7 valuation models that derive KOP's fair value estimate.
These stocks in the materials sector all have strong fundamentals and could easily trade higher following a positive earnings announcement.
If the first two weeks of the Q1'17 earnings season is any indicator for how the materials sector is going to perform, investors may want to take a closer look at these names prior to them reporting.
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photo credit: Evergreen Engineering
Note this is not a buy or sell recommendation on any company mentioned.